The government should bring down its stake in public sector banks
(PSBs) to 33 per cent in the next three years as it plans to
recapitalise banks to strengthen NPA-hit lenders, the Confederation of
Indian Industry has said.
”…Over the next 2-3 years, the Government could consider bringing
down its stake in most PSBs to 33 per cent. It could retain a larger
share in State Bank of India in order to meet priority needs. Offloading
of stake may be in the form of preference shares instead of equity
shares to maintain the majority voting rights with the Government with
nil transference to investors.
“On a more immediate basis the government may consider going for
public issue to dilute its stake to 52 per cent with the 33 per cent
being a target over the next 3 years,” the industry body said in a
statement.
Currently, PSBs are majorly owned by the government with a minimum
stake of 58 per cent which has now been relaxed to 52 per cent, it
added.
“However, many PSBs have a much higher Government equity holding at
over 80 per cent, while only 4 have brought down the share to 58 per
cent as of March 2017. New accounting standards will also be applicable
for banks from April 1, 2018. This is likely to increase provisioning
requirements on bad loans by as much as 30 per cent, further adding to
PSBs capital requirements,” CII said in its recommendation.
In October, the government had unveiled an unprecedented Rs 2.11 lakh
crore two-year roadmap for strengthening NPA-hit public sector banks,
which includes recapitalisation bonds, budgetary support, and equity
dilution.
Capital infusion will be accompanied by reforms to enable the
state-owned banks to play a major role in the financial system and give a
strong push to the job-creating MSME (micro, small & medium
enterprise) sector, Finance Minister Arun Jaitley had announced.
CII suggested a six-point agenda to the government to further recapitalise the PSBs.
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